Understanding the ERC721R Standard: How to Provide "No Reason Refund" Functionality for NFTs

Author: CryptoFighters Alliance

Compiled by: Amber, ForesightNews

The GameFi project CryptoFighters Alliance today introduced a new standard called ERC-721R on its official Twitter, which aims to add a refund feature to the ERC-721 and ERC-1155 standards. In simple terms, NFT projects using the new ERC-721R standard can offer users a "N days no-reason refund" feature, which will effectively reduce the risk of user losses caused by project teams absconding.

Reasons for launching this new standard

The NFT world needs a more effective accountability mechanism. Currently, there are many loopholes in the NFT market rules, and for the health of the entire NFT ecosystem, we need better mechanisms to prevent these issues from occurring.

Providing a refund mechanism can offer more effective protection for buyers while also accelerating the compliance process of the entire market.

The ERC-721A standard introduced by the Azuki team improved upon the most common ERC-721, effectively reducing gas consumption during the NFT minting process, while the ERC-721R standard introduced in this article will bring a trustless "refund" feature to the general standard.

How to implement it?

When you mint a series of NFTs using the ERC-721R standard, the minted funds will be held in escrow by a smart contract. The issuer cannot withdraw the funds immediately until the preset waiting period ends. During this waiting period, buyers can return their NFTs to the smart contract and reclaim the Ethereum they paid during minting.

If there are issues with the project due to the issuer's reasons, buyers can recover their funds before the waiting period ends. Although the gas fees paid during the entire process cannot be refunded, this will minimize the buyers' losses, while the issuer cannot profit from it.

Advantages

For buyers, NFT projects using this standard can effectively protect their rights. Even in the worst-case scenario, buyers can recover most of their funds, only needing to pay the gas costs incurred during the on-chain interactions. This can prevent buyers' funds from being taken away by malicious sellers, while also forcing creators to be more "mindful" during the product delivery process.

For sellers, using this new standard can be seen as a sign of "confidence" and "responsibility," allowing them to establish trust with buyers in advance.

Therefore, the constraints of this standard are actually beneficial for both buyers and sellers. Because of the impact of the refund mechanism, the floor price of the project during the waiting period generally will not fall below the minting price. At the same time, this will force short-term speculators to leave the project early and filter out "diamond hands" users who truly believe in the project.

Overall, aside from being bad news for those "scammers" intending to profit quickly through rug projects, the new standard is greatly beneficial for normal market participants.

How long should the waiting period be set?

There is no standard answer to this question, but there are some factors to consider.

A longer waiting period means that the team has more time to deliver before the waiting period ends. However, it also means that the team has to wait longer before they can access the funds.

Currently, projects that have already adopted this new standard show significant variation in the length of the waiting period:

• Exodia has a waiting period of 14 days;
• CryptoFighters has a waiting period of 45 days;
• Curious Addys Trading Club has a waiting period of up to 100 days.

Roadmap

In the future, the ERC-721R standard will also support more complex features, such as setting a time period and releasing the funds obtained from NFT sales to sellers in a linear manner. Alternatively, a specific ratio can be set, where a portion of the funds can be released immediately, while the remaining portion is released in batches over a period of time. Of course, this design means that the refund ratio of the amount paid by buyers will change according to the preset ratio, but the creative team can recover a portion of the funds earlier, which may help in the development of the project itself.